Automation: The exaggerated threat of robots

A lack of jobs and insufficient industrialisation are hampering the development of many African countries. Now another threat is seems to be emerging: the automation of production. However, it will take quite a lot of time before robots become cheaper than workers in Africa.

All industrialised countries used low-cost labour to build industries and manufacture mass-produced goods. Today, labour is relatively inexpensive in Africa, and a similar industrialisation process might take off accordingly. Some worry that industrial robots will block this development path. The reason is that robots are most useful when doing routine tasks – precisely the kind of work that is typical of labour-intensive mass production.

At the moment, however, robots are much too expensive to replace thousands upon thousands of workers in labour-intensive industries, most of which are in the very early stages of the industrialisation process. Robots are currently best used in technologically more demanding fields like the automobile or electronics industry.

Difficult digital environment

Even a rapid drop in robot prices would not lead to the replacement of workers by robots in the short term in Africa where countries lag far behind in terms of fast internet and other information and communications technologies. They also lack well-trained IT experts. Other problems include an unreliable power supply, high energy costs and high financing costs for new technologies. For these reasons, it would be difficult and expensive to integrate robots and other digital technologies into African production lines.

Correspondingly, there is still ample opportunity for labour-intensive industrialisation. African countries probably will not leapfrog multiple stages of technological development. It is far more likely that their business environment will steadily improve as it did elsewhere. Basic infrastructure – including reliable power supply, roads, ports, finance and also the building of human resources and funding – must be established first. On that foundation, companies can build up job-intensive industries.

Once the digital environment becomes good enough, it will make sense to use robots that will eliminate some jobs. But at the same time, the countries in question will be in a position to use new technologies to manufacture new products, which will in turn create new jobs.

International competition

There is a different threat, however. It concerns international competition. Industrial robots are allowing countries like Germany, the US, Japan and China to produce even more competitively than they did before. In these countries, robots are cheaper than well-paid industrial workers. Robot-using companies in these countries may out-compete African companies, the main competitive advantage of which is low wages.

This threat is not really new, however. Technologically advanced and innovative producers have always pushed other companies out of the market and made it difficult for companies from less innovative countries to catch up. How governments respond to this danger is what really matters.

China put in place policies to promote technologically demanding industries like automobile and electronics manufacturing. For example, foreign car companies were required to form joint ventures with Chinese firms in order to produce in the People’s Republic. That strategy gave Chinese partners access to foreign corporations’ technologies.

According to the UN Conference on Trade and Development (UNCTAD), the automation of production through robots and the corresponding cost savings could lead, in the medium-term, to companies shifting production away from developing countries and emerging markets back to industrialised countries. That would harm the growth of African industries that are involved in global value chains.

At the moment, however, the production capacities set up by western companies abroad exceed those that are brought back home by a factor of three. A discussion paper by the German Development Institute reports that the Chinese government expects 85 million jobs to migrate away from the country’s low-wage industries – of which a share might go to Africa.

It remains to be seen whether the trend will last or may eventually reverse itself. Relocating jobs back to a company’s home country only makes sense when automated production at home becomes cheaper than low-wage production in Africa.

Calestous Juma, the former professor at the Harvard Kennedy School of Harvard University who passed away in 2017, emphasised: “Jobs are not created or lost because of a single technology, but because of the business models designed to leverage the power of the technology”. As was the case with previous automation processes, African states are finding it difficult to reap the benefits of this new technology because of their limited ability to compete and their digital shortcomings.

Africa needs trade and industrial policies that give it leeway to develop its industries. Digital infrastructure, well-trained employees and affordable financing opportunities must become features of the business environment. Otherwise, it is impossible to make profitable use of robots in production processes. If, on the other hand, African capacities for innovation improve, that would also help to ameliorate the negative impacts of automation. Technology-driven modernisation should thus prove benign both in terms of innovative products and job creation.